The increase in drought has resulted in substantial decreases in crop production over the past several decades. Identifying the genes controlling drought tolerance is important for crop breeding and may help to achieve the goal of increasing food production by 70-100% by 2050 to feed a world population of ~9 billion. Soybean is one of the most important crops, serving as a major source of vegetable oil and protein for daily human life, but it is a drought-sensitive crop. Here, through a genome-wide association study (GWAS), we detected one significant association locus located on chromosome 16 that conferred the drought tolerance variations in a natural soybean population. Allelic analysis and genetic validation demonstrated that peroxidase16 (GmPrx16) was the causal gene in this association locus. Further functional investigation showed that a single nucleotide polymorphism (SNP) in the first exon of GmPrx16 resulted in differential peroxidase activity between the two haplotypes. Overexpression of GmPrx16 improved peroxidase activity and reduced the reactive oxygen species (ROS) content to enhance drought tolerance in soybean. We found that two response regulators, GmDRF1 and GmDRF2, were able to bind to the promoter of GmPrx16 to activate its transcription. Taken together, we identified GmPrx16 as a key gene responsible for drought tolerance in natural soybean populations, providing insights into the development of drought-tolerant soybean cultivars by molecular design breeding.